By Staff Writer

(Subscribers lookout for the MPS unpacking special report tomorrow)

HARARE – In its recently released 2021 Monetary Policy, the Reserve Bank of Zimbabwe (RBZ) became the third nation in the world alongside its SADC neighbours Mozambique and Zambia to hike its bank policy rate this year.

The Monetary Policy Committee (MPC) lifted the bank policy rate for overnight accommodation to 40% from 35%, Governor John Mangudya said it was to deal with speculative borrowing, in his monetary policy statement.

The Central Bank has used this measure as a way to curb inflation since last year, and as inflationary pressures begin to mount it is no surprise that the MPC resorted to its tool of choice. This is the first increase since June 2020 and follows tightening by its neighbours Mozambique and Zambia last month and yesterday respectively.

Such a move is made in order to reign in inflation but keep economic growth going positive, as such the Medium-Term lending rate for the productive sector saw a 500-basis points increase from 25% to 30% effective immediately.

However, despite the move, a lag in the effects of currency depreciation on the currency auction will be expected to still put pressure on inflation.

In his MPS the Governor said Statutory Reserves should be increased to 5% from 2.5% 0n demand/call deposits but remain flat at 2.5% on time deposits. This is a move to reduce excess money hanging around doing nothing in the system.

Cash withdrawal limit was increased to $2,000 as the mobile money limits of $5,000 per transaction and $30,000 per week were left unchanged.

Mangudya also reiterated that the new $50 note was coming, but expressed his fear of inflation being caused by the move as he said, “The Bank reiterates that banknotes, new or old, do not cause inflation in an economy since they do not increase money supply”.


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